Costs and Benefits of Transmission Investments in the United States under Different Policy Scenarios

Abstract

The United States faces the need to build generation and transmission infrastructure to meet a growing electricity demand. We assess the value, asset investments, and emissions impacts of building transmission, generation, and storage under varying policy scenarios. We model cost-optimal investments and operations for 2035 and 2050 by finding the minimum annualized total system costs for investments and operations of generation, transmission, and storage under a set of technical and policy constraints for a current policy scenario, a renewable tax credit scenario that assumes recently repealed tax credits remain in effect, and zero-emissions scenarios in which the U.S. electricity sector achieves zero CO2 emissions by 2050. We also explicitly report on the expenditures associated with production/investment tax credits to illustrate the private and gross public costs. Our key results are as follows: (i) investments in transmission infrastructure reduce system costs in all policy scenarios, albeit modestly under non-emissions constrained scenarios; (ii) large emissions reductions could be achieved even absent zero-emissions goals if tax credits/incentives for renewables are in place - indeed, we find that with renewable incentives in place, annualized system costs remain within 6% of the current policy scenario, while reducing emissions by 46% even if no additional interregional transmission is built; (iii) generation cost reductions are driven by wind capacity investments across all scenarios; and (iv) where transmission is built matters: certain seams, such as those connecting the eastern interconnection to ERCOT and the western interconnections, are selected across all policy environments. Overall, our findings support the economic and emissions benefits that can be realized by planning investments in generation, transmission, and storage across the United States.